The estimate submitted to me by the Secretary of the Treasury and the
Budget Director indicates that the Government will close the fiscal year
1930 with a surplus of about $225,000,000 and the fiscal year 1931 with a
surplus of about $123,000,000. Owing to unusual circumstances, it has been
extremely difficult to estimate future revenues with accuracy.
I believe, however, that the Congress will be fully justified in giving the
benefits of the prospective surpluses to the taxpayers, particularly as
ample provision for debt reduction has been made in both years through the
form of debt retirement from ordinary revenues. In view of the uncertainty
in respect of future revenues and the comparatively small size of the
indicated surplus in 1931, relief should take the form of a provisional
revision of tax rates.
I recommend that the normal income tax rates applicable to the incomes of
individuals for the calendar year 1929 be reduced from 5, 3, and 1 1/2;
per cent, to 4, 2, and 1/2; per cent, and that the tax on the income of
corporations for the calendar year 1929 be reduced from 12 to 11 per cent.
It is estimated that this will result in a reduction of $160,000,000 in
income taxes to be collected during the calendar year 1930. The loss in
revenue will be divided approximately equally between the fiscal years 1930
and 1931. Such a program will give a measure of tax relief to the maximum
number of taxpayers, with relatively larger benefits to taxpayers with
small or moderate incomes.